Finance & Fiscal Services

A plan for the utilization of revenues for expenditures over a specific time period (i.e., a fiscal year --July 1 to June 30).  This is not the “Estimate of Needs” that is prepared each year by the auditor.  Rather, the budget is a much more detailed “financial plan” for the district.

Yes, required by Oklahoma Statutes (Title 70 O.S. Sec 5- 134.1) school districts must “...adopt a budget for the current fiscal year.  The budget shall include functional categories as defined by the Oklahoma Cost Accounting System (OCAS).”

Oklahoma Statutes (Title 68 O.S. Sec. 3002) require the Board of Education, prior to Sept. 1 of each year, to “...make a written itemized statement of estimated needs (expenditures) and probable income from all sources including ad valorem taxes for the current fiscal year ...” The Estimate of Needs (EoN) includes all appropriated funds of the district: General Fund, Building Fund, Child Nutrition Fund, Bond Funds, and Sinking Fund.

Is the EoN basically the operating budget of the District?

No.  The Estimate of Needs establishes a maximum amount that the Board of Education can approve for its various budgets. By law, the district’s operational budget cannot exceed the “total appropriation” (maximum allowable amount) established by the Estimate of Needs.

Does the EoN include all revenue sources estimated to be received by the District during the fiscal year?

Yes. However, by law, the Estimate of Needs can only include 90% of the projected tax collections from Ad Valorem (property tax) revenues for the General Fund and Building Fund, as 10% is required to be excluded as a “delinquency reserve”. Normally, school districts estimate between 93% and 97% of ad valorem collection for their operational budgets. All other revenue sources are based on historical collection rates or official allocation notices for state and or official allocation notices for state and federal grant programs.

A brief summary of the major steps to preparing an operational budget are:

1.  Estimate the total amount of revenue to be received during the fiscal year based on historical collection rates, trends, or allocation notices. 
2.  In addition to the revenue estimates, the fund balance (carryover) from the previous fiscal year is included to determine the total funds available.
3.  Estimate total expenditures by category. These major categories, listed below, should be based on historical costs, new or increased costs, new programs, and other factors. 

a) Payroll/benefit costs (this is the largest and most important estimate.) 
b) Fixed costs (insurance, utilities, etc.) 
c) Operational budgets (schools, depts.) 
d) Other curriculum/instructional and related costs (textbooks, testing, professional development, etc.)

The total operational budget must not exceed the “total appropriation” amount authorized by the Estimate of Needs. Also, the operational budget should be prepared  with proper planning so total expenditures are less than total funds available (revenues plus fund balance) to ensure that a fund balance amount will be carried over at the end of the fiscal year.

Fund balance (a.k.a. carryover or surplus) is the “unencumbered” or “available” balance of funds at the end of a fiscal year that has not been reserved to pay for any goods/services which will be received after June 30.

A fund balance is necessary for the following reasons:

1. To help districts fund payroll and other costs during the first half of the school year when expenditures are more than revenue collections because there is no State Aid payment received in July, and the majority of ad valorem tax revenue is not received until January and April. (NOTE: State Aid payments are received equally over a period of 11 months - August through June. State Aid is not paid to the district in a “lump sum” at the beginning of the fiscal year.)
2. To meet unanticipated expenses. 
3. To help fund future budgets, if planned expenditures exceed anticipated revenues. The percentage of fund balance that can be carried into the next year is limited by state law. The penalty for excess carryover is a reduction to state aid the next year.

• Local (39%) - Ad valorem taxes, interest earnings, tuitions, rentals and reimbursements
• Intermediate (5.5%) - County 4-mill taxes, resale property fund, apportionment taxes 
• State (45%) - Gross production taxes, REA taxes, motor vehicle taxes, school land earnings, tax stamps, State Aid, state categorical grants
• Federal/Other (10.5%) - Federal grant programs, activity fund reimbursements, etc.

State Aid represents the funds that are appropriated by the State Legislature for school districts and distributed by the State Dept. of Education through the “State Aid Formula”. State Aid is based primarily on student counts, with allowances made for various student characteristics represented as grade and categorical weights. State Aid uses the higher of the current or two previous years’ student counts. Thus, if a district’s student count increases, the State Aid is adjusted in the current year. 
If a district’s student count decreases, the State Aid does not decrease for two years. The State Aid calculated using these student counts is then reduced for local revenue collections by subtracting “chargeables.”

What are "chargeables?"

“Chargeables” are a district’s local revenue sources that are included in its annual State Aid calculation. The revenue sources are: Ad valorem property taxes, motor vehicle collections, gross production taxes, school land earnings, county 4-mill taxes and rural electric association taxes. The amount of these funds collected by a district (current year for ad valorem & previous year for others) are “charged” or subtracted from the district’s State Aid since these funds are collected locally. As these revenue sources rise (like ad valorem taxes), the district’s “chargeables” also increase, meaning less State Aid for the district.

The General Fund provides direct and support services for all students enrolled in the district. This includes salaries/benefits, instructional supplies/materials, equipment, utilities, insurance, other costs.

School districts typically spend 80 to 95 percent of the General Fund on salaries and benefits.

Approximately 92%.

In Oklahoma, administrative costs for schools are subject to certain limits, and the Oklahoma State Department of Education (OSDE) has regulations and guidelines regarding how these costs are calculated and managed, particularly for schools contracting with educational management organizations. 

This is calculated under Title 70 O.S. Sec 18- 124. Districts have percent limitations on administrative costs. If a district exceeds the allowable administrative costs the district’s state aid will be reduced the following year.  Mustang Public Schools is allowed up to 5%, but is currently at ~3.4% .

Resources
2016 Administrative Cost Factsheet

OSDE School Finance Website

OSDE Financial Accounting Website

The Building Fund provides for maintenance and repair operations, upkeep and construction of district facilities and grounds, contractual services, and salaries/benefits for custodial and maintenance services. By law, only salaries and benefits for these purposes may be paid from the Building Fund.

The Child Nutrition Fund provides for the purchase and delivery of food services to the district’s students and staff on a daily basis. This includes food costs, salaries/benefits for cafeteria staff, and purchase, maintenance, and repair of equipment.

Oklahoma statutes generally prohibit school debt, except for the following three instances:

1. Bond issues

A.  Lease-purchase agreements
B.  Non-payable warrants

2. The most common way that school districts “borrow” money is through the passage of bond issues.

3. State law requires approval of at least 60% of the voters in a bond election before a district can issue bonds.

Bond issue proceeds must be spent for improving or acquiring school sites, constructing, repairing, remodeling and equipping school buildings, acquiring school furniture, fixtures, equipment, uniforms, technology and transportation equipment. No less than 85 percent of all bond issue proceeds must be spent on the list of projects included in the bond resolution and approved by the voters. The remaining 15 percent can be spent on similar-type projects as approved in the bond issue election or can be used to reduce the sinking fund debt. By law, no salaries, benefits or related costs can be paid with bond fund proceeds or interest earnings.

Bond principal and interest are paid from ad valorem tax revenues. Districts collect ad valorem taxes through a tax levy assessed on real property, personal property and public service property and place these collections in the “Sinking Fund.” This tax levy is referred to as the “Sinking Fund mill levy” and is separate from the General Fund and Building Fund tax levies School bonds are limited to a 25 year term by state law, but five to ten year bonds are typical. The Sinking Fund is also used to pay any judgments levied against the school district. By law, no other expenditures can be paid from the Sinking Fund. The Sinking Fund levy changes each year based on the total property valuation in the district and the amount of bond principal and interest paid off during the year.

A “mill” is a term that is equivalent to one-tenth (1/10) of one penny ($0.001). The total mill levy for a taxpayer’s property includes all levies of the following entities that can choose to levy a tax.

1. School district

2. Vo-Tech district

3. County / City

4. Hospitals

5. Library

Below is an example of how to calculate the school district’s portion of taxes levied for the calendar year:

EXAMPLE: $100,000 home in a district with a $1,000 homestead exemption. $100,000 X 11% assessment ratio (Oklahoma County) = $11,000 $11,000 - $1,000 exemption = $10,000

a. Total millage levy: 1. General Fund 36.98 mills, Building Fund 5.28 mills, Sinking Fund 24.04 mills, Total levy 66.30 mills.

b. Total school district taxes: $10,000 X 0.06630 (66.30 mills) = $663.00 ($55.25 per month) To determine the total tax bill for the year, the other mill levies (vo-tech, county, etc.) must be included.